A New  Flowering 
of  Co-operation 


Address  of  G.  D.  Ogden,  Traffic  Manager, 
Eastern  Region,  Pennsylvania  Railroad, 
before  the  Twentieth  Regular  Meeting, 
Great  Lakes  Regional  Advisory  Board, 
Commodore  Perry  Hotel,  Toledo,  Ohio, 
January  11,  1928 


Digitized  by  the  Internet  Archive 
in  2015 


https://archive.org/details/newfloweringofcoOOogde 


1"  ^ __ 


A New  Flowering 
of  Co-operation 


Mr.  Chairman,  Members  and  Guests  of  the 
Great  Lakes  Regional  Advisory  Board: 

Mr.  Stevens,  in  extending  an  invitation  to  be 
here  today,  I assume,  did  so  with  kindly  intent, 
because  we  have  been  friends  for  many  years.  No 
doubt  Mr.  Stevens  wishes  me  to  do  well,  all  of  which 
implies  a great  responsibility  in  my  humble  effort 
to  bring  to  you  a message  that  will  at  least  merit 
your  moderate  approbation. 

Advisory  Boards  throughout  the  country  are  of 
comparatively  recent  origin  and  so  is  the  present- 
day  efficiency  of  American  railroads.  There  is  no 
doubt  whatever  that  the  former  preceded  the  latter; 
also,  by  the  same  process  of  analysis,  every  fair- 
minded  railroad  man  concedes  the  argument  that 
the  trail  was  blazed  at  the  early  conferences,  now 
popularly  known  as  Advisory  Board  meetings,  for 
intimate  mutual  understanding.  Also,  even  to  a 
greater  degree,  high-powered  inspiration  was  realized, 
which  was  followed  by  constructive  group  action  for 
what  has  become,  generally,  the  most  efficient  and 
expeditious  transportation  service  of  all  time  for  the 
distribution  of  commercial  commodities. 

Improved  Railroad  Service. 

It  requires  much  effort  to  increase  successfully 
the  speed  of  large  organizations  as  typified  by  the 
Group  1 railroads,  which,  put  another  way,  means 
we  have  nearly  half  of  the  railway  mileage  of  the 


3 


world  with  only  6%  of  the  population.  New  methods 
had  to  be  discovered  to  replace  old  ones  that  had 
failed  and  were  doomed  to  be  scrapped.  The  Great 
Lakes  Regional  Advisory  Board  and  sister  organi- 
zations deserve,  and  are  cheerfully  accorded,  generous 
credit  for  having  “whetted”  the  appetites  of  trans- 
portation men  for  bigger  and  better  things  until  you 
actually  find  always  present  at  these  splendid  meet- 
ings, keen  and  healthful  competition  between  the 
railroads  for  more  business  based  upon  meritorious 
performance,  and  so  stated  by  their  duly  authorized 
representatives  in  open  meeting  without  fear  of  con- 
tradiction. A few  contributory  factors  will  prove 
of  interest: 

In  1920,  24 of  all  freight  locomotives  were 
in  bad  order.  In  1927,  this  had  been  reduced  to 
16.4%. 

In  1920,  7%  of  all  the  freight  cars  in  the  country 
were  in  bad  order.  In  1927,  this  had  been  reduced 
to  6.5%. 

In  1920,  the  average  distance  traveled  by  a 
freight  car  was  25.1  miles  per  day.  In  1927,  this 
had  been  increased  to  30.4  miles  per  day,  a gain  of 
21%  in  the  effectiveness  of  freight  car  movement. 

In  1920,  the  average  freight  train  was  37  cars. 
In  1927,  this  figure  advanced  to  45  cars,  an  increase 
of  22%. 

In  1920,  the  average  freight  train  carried  708 
tons  of  freight.  In  1927,  this  increased  to  772  tons, 
a gain  of  9%. 

In  1920,  car  shortages  were  severe  and  costly. 
In  1926  and  1927,  with  greatly  increased  traffic,  car 
shortages  were  practically  eliminated. 

Despite  the  marked  improvement,  yet  much 
remains  in  the  future  for  successful  development  ot 
industry,  perfection  of  processes  and  quality  of 
product  before  we  attain  the  goal  for  economic  trans- 


4 


portation,  sales  and  distribution.  I cheerfully  proffer 
the  challenge  that  the  railroads  will  continue  to 
show  improvement  and  arise  to  meet  successfully 
the  new  demands  upon  them.  These  have  been 
greatly  simplified  during  recent  years  by  that  sub- 
stantial encouragement,  through  recognition  upon 
your  part  that  industrial  success  in  the  past  always 
has  been  preceded  by  prosperous  railroads.  We  must 
see  to  it  on  the  railroad  side  that  nothing  occurs  to 
impair  such  confidence.  May  we  therefore  very 
briefly  review  a few  of  the  factors  responsible  for  our 
unprecedented  prosperity  during  1927: 

The  American  standard  of  living,  according  to  a 
report  issued  by  the  Bureau  of  Internal  Revenue,  has 
now  attained  a level  wholly  without  precedent  or 
parallel.  Because  it  is  human  nature  to  live  as  well 
as  circumstances  will  permit,  the  scale  of  living  of 
any  people  constitutes  a trustworthy  index  to  the 
merits  of  the  economic  and  political  system  under 
which  we  live. 

Basic  Factors  in  American  Prosperity. 

We  have  in  this  country  15  telephones  per  100 
persons  as  against  3 telephones  per  100  in  Great 
Britain,  yet  Great  Britain  is  one  of  the  most  advanced 
nations  of  Europe. 

We  lead  the  world  in  the  use  of  the  radio  and  are 
well  on  the  way  to  supremacy  in  commercial  aviation, 
which  has  experienced  a remarkable  growth  in  the 
last  seven  years,  chiefly  under  the  impetus  of  private 
capital.  Sixty-six  station  stops,  serving  eighty-four 
cities  with  an  aggregate  population  of  24,000,000, 
were  linked  up  in  the  regular  air  routes  during  1927. 
The  transcontinental  air  mail  route  is  undoubtedly 
the  finest  example  of  flying  in  the  world  today. 
Most  of  the  flying  in  Europe  is  under  government 
supervision,  either  military  or  civil. 


S 


Another  explanation  of  our  business  activity  and 
prosperity  is  that  our  people  are  buying  and  using 
more  goods  than  in  any  previous  period.  They  are 
not  afraid  to  spend,  a trait  that  is  made  effective  by 
another  typical  characteristic — they  are  not  afraid  to 
work.  Even  though  the  nation’s  resources  are  vir- 
tually unlimited,  they  would  count  for  little  if  it  were 
not  for  the  industry  of  the  people. 

Many  articles  which  were  luxuries  a few  years 
ago  are  now  regarded  as  necessities  of  life;  further- 
more, a family  of  ordinary  means  in  this  country 
enjoys  comforts  and  conveniences  that  are  beyond 
the  reach  of  even  well-to-do  families  in  the  old  world. 
These  are  indices  of  that  wide  diffusion  of  wealth  in 
this  country  which  frequently  lead  superficial  observers 
to  assert  that  Americans  live  extravagantly.  Auto- 
mobiles and  radios  in  hundreds  of  thousands  of 
American  homes,  which  also  use  electricity,  sanitary 
plumbing  and  modem  heating  plants,  scarcely  can  be 
regarded  as  having  impoverished  the  people,  especially 
when  it  is  recalled  that  our  people  also  have 
$26,000,000,000  on  deposit  in  savings  accounts. 
Twelve  years  ago,  the  savings  accounts  in  the  country 
amounted  to  only  $6,000,000,000. 

Therefore,  a new  meaning  for  the  word  “thrift” 
has  been  evolved  as  contrasted  with  the  self-sacrifice 
of  our  forefathers. 

It  can  be  very  properly  questioned  if  it  necessarily 
follows  that  spending  is  an  economic  crime,  or  that 
saving  is  an  economic  virtue.  There  is  a happy 
medium.  “If  one  spends  what  he  should  prudently 
save,  that  certainly  is  to  be  deplored,  but  if  one  saves 
what  he  should  prudently  spend,  that  is  not  necessarily 
to  be  commended.”  The  best  definition  is,  to  work  dili- 
gently and  spend  prudently,  which  is  characteristic  of  a 
large  proportion  of  our  citizenry  and  one  of  the  impor- 
tant fundamental  causes  for  present-day  prosperity. 


6 


While  marveling  at  the  unrivaled  prosperity  of 
this  country,  many  of  us  have  been  wondering  about 
the  underlying  causes.  They  are  obviously  numerous, 
but  a phenomenon  which  I shall  describe  as  the  “New 
Flowering  of  Co-operation”  seems  entitled  to  recogni- 
tion as  the  basic  cause. 


The  New  Flowering  of  Co-operation. 

Large  capital  investment  is  the  system  of  political 
economy  under  which  the  leading  nations  of  the 
world,  with  one  notorious  exception,  are  living  and 
have  lived  for  many  years.  Its  origin  is,  of  course, 
i not  American,  going  back  to  the  earliest  times;  but 
in  the  course  of  its  advance  to  new  heights  in  the 
United  States,  the  system  has  been  so  extensively 
expanded,  refined  and  adapted  to  meet  our  special 
needs  that  what  may  be  termed  a distinct  American 
co-operative  technique  has  been  evolved.  The  new 
factors  supplied  by  the  United  States  are:  1st,  almost 
unlimited  natural  resources;  2d,  the  energy  and 
thrift  of  the  people;  3d,  the  vision  and  boldness  of 
business  and  industrial  leaders;  and  4th,  fundamental 
political  institutions  encouraging  individual  effort 
and  enterprise  under  equal  freedom  of  opportunity 
for  all. 

It  is  not  surprising,  therefore,  that  corporations, 
the  agencies  through  which  the  system  operates  at 
’ maximum  efficiency,  are  larger  and  more  numerous 
in  the  United  States  than  in  any  other  country.  These 
huge  co-operative  enterprises,  representing  the 
combined  capital  of  many  individuals,  have  made 
possible  the  use  of  machinery  on  such  a gigantic 
scale  that  the  American  workman  has  become  a 
director  of  machinery  in  the  fullest  meaning  of  that 
term.  The  outstanding  characteristics  of  the  new 


7 


American  co-operative  technique  are  mass  produc- 
tion, quick  distribution,  steady  employment,  good 
wages  and  heavy  consumption. 

Although  large  capital  investment,  like  other 
things  of  human  contrivance,  has  its  defects,  most 
of  the  civilized  world  is  yet  to  be  convinced  that 
socialism,  communism  and  any  other  proposed  sys- 
tem offers  more  advantages  and  fewer  disadvantages. 
The  present  dominant  position  of  the  corporate 
form  of  organizing  capital  is  the  result  of  an  evolu- 
tion of  industrial  methods  in  this  country  covering 
approximately  a century. 

A hundred  years  ago,  factories  or  other  enter- 
prises were  small  and  production  was  low.  Then 
a man,  or  a small  group  of  men,  was  able  to  supply 
the  capital  and  manage  the  business,  while  the 
employes,  enjoying  direct  contact  with  the  owner 
and  manager,  were  able  to  negotiate  individually 
for  the  sale  of  their  time  and  labor. 

With  the  coming  of  machinery,  however,  trade, 
manufacturing,  transportation  and  communication 
began  their  expansion  into  the  great  realms  they 
occupy  today,  and  direct  contact  necessarily  became 
only  moderately  possible.  The  individual  owner 
was  replaced  by  large  companies  owned  by  thousands 
of  stockholders,  and  the  individual  became  a worker 
in  an  organization  having  thousands  of  employes. 
This  change  led  to  misunderstanding  and  conflict. 
In  the  confusion  of  readjustment,  it  required  time 
for  both  management  and  men  to  perceive  that 
their  respective  interests  are  in  the  last  analysis 
identical,  rather  than  divergent. 

The  situation  finally  forced  what  some  econo- 
mists termed  a belated  appreciation  of  the  importance 
of  proper  human  relations  in  industry,  and  threw 
into  bold  relief  the  need  for  finding  an  effective  sub- 
stitute for  that  vanished  personal  contact  between 


s 


management  and  employe,  which,  under  the  more 
favorable  conditions  of  small  industry,  invariably 
nurtured  the  feeling  of  unity  and  partnership. 

The  development  of  intensive  human  relation 
programs  has  stimulated  the  growth  of  a more  en- 
lightened and  rational  interpretation  of  self-interest 
in  the  collective  mind  of  both  employer  and  employe, 
and  the  absence  in  recent  years  of  serious  conflicts 
between  capital  and  labor  certainly  is  due,  at  least 
in  part,  to  this  new  point  of  view. 

A New  Era  in  Human  Relations. 

Typical  human  relation  programs  usually 
include  some  procedure  for  orderly  collective  bar- 
gaining, retirement  and  pension  provisions,  thrift 
agencies,  and  employe  ownership  of  capital  stock. 
All  these  features  have  contributed  to  the  success 
of  the  general  program,  but  we  may  regard  as  peculi- 
arly significant  the  employe  stock  ownership  plans 
which  many  corporations  have  in  operation  today, 
because  they  are  transforming  thousands  of  wage 
earners  into  employe-capitalists.  This  function  is 
one  of  the  most  encouraging  aspects  of  the  new  and 
vast  development  of  industry. 

The  special  merit  of  employe  stock  ownership 
plans  is  that  they  make  thrift  easy  and  convenient. 
Capital  stock  can  be  acquired  through  installment 
payments,  taken  care  of  by  regular  payroll  deductions. 
This  mechanism  makes  employes’  saving  systematic 
and  automatic,  and  then  carries  it  along  to  safe 
investment. 

A device  of  this  nature  is  a veritable  boon  to  that 
large  class  of  employes  in  every  organization  not 
previously  trained  to  save  by  ordinary  methods.  On 
the  other  hand,  it  enables  corporations  to  recruit 
thousands  of  partners  from  a field  formerly  un- 
developed. 


9 


More  than  400  corporations  in  America  now  have 
employe  stock  ownership  plans  of  various  types  in 
operation,  and  the  results  attained,  combined  with  the 
ordinary  saving  by  wage  earners,  constitute  an  im- 
pressive advance  in  the  ownership  and  use  of  capital 
by  employes.  In  fact,  it  is  no  longer  possible  to  say 
with  any  degree  of  accuracy  that  this  man  is  a wage 
earner  and  that  man  is  a capitalist. 

These  plans  are  undoubtedly  warranted  in  part  by 
considerations  of  company  advantage,  but  every  one 
recognizes  a joint  benefit  to  both  employe  and 
company  from  the  mere  substitution  of  habitual 
thrift  for  habitual  improvidence.  Any  effect  of  own- 
ing company  stock  on  employe  morale,  on  employe 
attitude  toward  company  affairs  or  on  employe 
stability  is  surely  of  importance,  but  behind  all  these 
plans  is  a sincere  interest  in  the  personal  and  family 
security  of  the  individual  wage  earner,  in  seeing  him 
get  ahead,  experience  happiness  in  living,  and  get 
something  put  by  against  life’s  inevitable  emergencies. 

Employe  ownership  of  stock,  therefore,  because 
the  plan  works  well  both  ways,  is  now  generally  con- 
ceded to  be  a perfectly  logical  and  practical  develop- 
ment, which  seems  destined  to  bring  the  modem 
idea  of  industrial  co-operation  between  men  and 
management  to  its  greatest  usefulness. 

The  relations  between  capital  and  wage  earners 
are  not,  however,  the  only  field  in  which  the  growing 
spirit  of  co-operation  has  been  instrumental  in  bring- 
ing about  notable  progress.  During  recent  years 
business  has  come  to  appreciate  its  own  respon- 
sibilities, its  own  duties  of  self-control — its  obligation 
not  merely  to  keep  within  the  law,  but  to  make  its  prac- 
tices conform  with  the  broad  principles  of  fairness  and 
justice  beyond  what  the  law  specifically  commands. 

In  other  words,  business  is  adopting  ethical 
standards  of  the  professions  and  in  so  doing  is  meriting 


10 


the  designation  now  sometimes  applied  to  business— 
“The  oldest  of  the  arts  and  the  newest  of  the  pro- 
fessions.” This  greatly  improved  and  enlightened 
spirit  now  largely  dominates  the  competitive  and 
other  relations  which  obtain  between  enterprises  in 
the  same  field  of  industry,  as  well  as  the  contacts  of 
business  in  general  with  the  public  and  governmental 
authorities. 

In  this  connection,  I would  like  to  read  an  excerpt 
from  an  editorial  recently  appearing  in  the  Wall 
Street  Journal  as  appertaining  to  the  automotive  in- 
dustry, a major  activity  in  the  Great  Lakes  region: 
“In  all  human  relations  other  than  com- 
mercial it  is  old  wisdom  that  courtesy  has  a 
moral  value  of  its  own,  and  all  the  more  so  when 
it  costs  those  who  display  it  something  of  an  effort. 
We  at  least  set  ourselves  a standard  when  we 
strive  to  seem  to  be  that  which  we  know  we  should 
be.  The  persistent  practice  of  good  behavior 
against  natural  impulses  in  the  end  affects 
character  for  the  better.  These  are  truisms  in 
respect  to  the  ordinary  personal  contacts,  but  it  is 
only  comparatively  recently  that  business  men 
have  begun  seriously  to  question  their  ancient 
rule  of  ‘Tear  or  be  tom.’  ” 

This  editorial  was  acknowledged  by  Mr.  Alfred 
Reeves,  General  Manager,  National  Automobile 
Chamber  of  Commerce.  I shall  not  take  time  to  read 
the  letter  in  its  entirety  but  merely  quote  an  excerpt: 
“Editor  of  the  Wall  Street  Journal: 

“We  all  read  the  editorial  ‘Courtesy  Among 
Competitors’  with  great  interest,  and  it  already 
has  brought  much  favorable  comment.  It  is  a 
fact  we  may  be  a little  broader  in  the  automobile 
industry  than  in  most  industries,  but  we  have 
found  it  pays  socially  as  well  as  financially. 
******* 


H 


“We  did  put  700  patents  in  a pool,  permit- 
ting every  member  to  use  them  without  money 
payment,  and  we  do  many  other  things  at 
which  some  of  the  older  industries  look  aghast. 

* * * * * * * 

“Practically  every  big  manufacturer  is  a 
director  here,  and  acts  as  chairman  of  some 
committee  which  is  doing  constructive  work 
for  the  benefit  of  the  industry  as  a whole. 

“Incidentally,  we  are  duplicating  your 
article  for  distribution  throughout  the  in- 
dustry.” 

However,  the  immense  growth  in  the  power 
and  influence  of  business,  following  the  advent  of 
mass  production,  together  with  the  great  combi- 
nations of  capital  which  were  subsequently  formed, 
created  a somewhat  general  feeling,  doubtless  in 
some  degree  justified,  that  the  public  welfare  re- 
quired business  to  be  regulated.  Obviously  this 
regulation  must  be  done  either  by  the  government 
or  by  business  itself. 

Public  Regulation  in  Business. 

In  this  country  we  experimented  first  with 
government  regulation,  as  exemplified  by  the  anti- 
trust laws,  and  the  dissolution  suits  brought  under 
them,  and  later  by  the  formation,  some  13  years 
ago,  of  the  Federal  Trade  Commission. 

The  Commission  was  created  by  Congress  to 
prevent,  or  at  any  rate  make  difficult,  unfair  practices 
and  unfair  wasteful  methods  of  competition  in 
business.  It  was  supposed  to  function  by  giving 
publicity  to  its  adverse  findings,  the  thought  being 
that  public  opinion  would  compel  the  abandonment 
of  practices  so  condemned. 


12 


It  must  be  confessed  that  at  the  start  the  Com- 
mission was  not  popular  with  business  or  business 
j leaders.  In  fact,  sentiment  was  distinctly  hostile 
to  it.  On  the  other  hand,  it  is  not  going  too  far  to 
! say  that  the  Commission  in  many  respects,  during 
j its  earlier  days,  at  times  exhibited  alleged  unsound 
and  radical  tendencies. 

! Business  Inaugurates  Voluntary  Regulation. 

This  was  an  undesirable  situation,  but  for- 
; tunately  it  did  not  prove  permanent.  The  approach 
toward  a common  meeting  ground  was  made  by 
! moves  on  both  sides.  The  Commission,  on  its  side, 
swung  away  from  the  radical  viewpoint;  business, 
on  its  side,  moved  toward  realization  of  the  fact 
that  abandonment  of  questionable  or  unpopular 
practices,  or  wasteful  methods  in  competition, 
would  be  good  for  business  itself  as  well  as  for  the 
general  public. 

What  happened  was  simply  that  enlightened 
self-interest  brought  clearly  to  the  collective  mind 
of  business  the  value  and  necessity  of  proper  group 
action  and  the  need  for  formulating  ethical  standards 
of  group  conduct  and  service  to  the  public. 

These  developments  are  now  exemplified  in 
general  movements  set  up  in  practically  every  great 
branch  of  business,  trade  and  industry,  establishing 
standards  of  conduct  toward  both  patrons  and 
competitors  comparable  with  those  long  recognized 
among  the  members  of  the  learned  professions. 

Thus  business  by  voluntary  agreement  among  its 
leaders  is  creating  what  is  virtually  a new  and  self- 
imposed  system  of  law.  It  is  placing  the  seal  of  con- 
demnation on  abuses  or  other  practices  tending  to 
impair  the  public  confidence  in  the  integrity  of 
business  men,  or  which  taint  with  unfairness  the  re- 
lations of  business  men  with  the  public  or  with  one 


13 


another,  resulting  in  wasteful  or  extravagant  competi- 
tion. Fair  and  sound  practices  are  thus  enforced 
through  the  extremely  effective  sanction  of  group  j 
action  and  group  standards  of  conduct. 

In  this  work  of  voluntary  regulation,  business, 
instead  of  being  hindered,  has  received  invaluable  I 
aid  from  the  Federal  Trade  Commission.  In  the  year 
1919,  the  Commission  inaugurated  what  is  generally  |: 
known  as  its  “trade  practice  submittal  plan.”  The  I 
working  of  this  plan  is  very  simple.  A committee, 
representative  of  any  given  trade,  meets  in  conference  I: 
with  one  or  more  members  of  the  Commission.  At  i 
this  conference  practices  are  considered  and  agreed 
upon  intended  to  remedy  any  wrongful  condition  I 
already  existing,  and  obviate  wrongful  acts  or  unfair 
or  wasteful  practices  in  the  future 

These  proceedings,  it  should  be  understood,  are 
voluntary  and  are  not  legally  binding  upon  either 
the  trade  affected  or  upon  the  Commission.  In  j 
practice,  however,  they  have  been  found  fully  as  J; 
effective  as  any  law  which  could  be  formally  enacted, 
and  probably  in  most  cases  much  more  effective  than 
actual  legislation. 

When  a set  of  trade  rules  have  been  thus  estab- 
lished, the  Commission  treats  any  subsequent  viola- 
tion as  prima  facie  evidence  of  the  use  of  unfair 
methods.  Such  violations  have  not  often  occurred, 
but  when  they  have,  it  has  rarely  been  necessary  for 
the  Commission  to  do  more  than  call  the  attention  of  the 
offending  member  to  the  fact  that  he  has  broken  one  of 
the  rules  established  by  the  joint  action  of  his  own  trade. 

We  may  therefore  enter  upon  1928  with  renewed 
assurance  that  industrial  and  transportation  princi- 
ples of  conduct  are  showing  constructive  advancement 
each  succeeding  year.  Let  us  hope  as  a nation  we 
shall  forge  ahead  to  greater  heights  of  commercial 
supremacy  during  the  current  year. 


In  closing,  our  President,  General  W.  W.  Atter- 
bury,  commented  upon  the  railway  outlook  for  1928 
as  follows: 

“Railroads  are  operating  today  with  greater 
confidence  in  the  future  than  they  have  had  in 
the  last  twenty  years.  This  is  due  chiefly  to 
two  outstanding  factors: 

“1st  — Railroad  service  itself  is  better  today  than 
it  ever  was,  and, 

“2nd — The  people  of  the  United  States  know  it 
and  want  it  continued;  and  railroad  in- 
vestors are  encouraged  to  furnish  more 
capital  for  the  expansion  and  improve- 
ment of  that  service.” 

I thank  you. 


is 


